The Office of the Governor of California recently announced that Gov. Gavin Newsom and California legislative leaders approved a cap of 5 percent plus inflation per year on rent increases statewide for the next 10 years. The new bill does not apply a cap to vacant units, and owners can continue to reset rents to market rate at vacancy. The deal, which needs approval of the full California State Legislature, also includes a provision that prevents landlords from evicting certain tenants without landlords first providing a reason for the eviction and requires relocation assistance. The final deadline for the California legislature to send new laws to Gov. Newsom's desk is Sept. 13, 2019.

The prior draft of the new bill, AB 1482, provided that until Jan. 1, 2023, an owner of a residential property cannot increase the rental rate for that property more than once annually, and that owner cannot increase the rental rate in an amount that would be greater than 7 percent plus a change in the cost of living or 10 percent, whichever is lower for the preceding 12 months. Under the agreement, the lockout period would be 10 years, and the increase would not be more than 5 percent. This version, with the lockout on increases until 2030, has gained traction and support from San Francisco Mayor London Breed, Oakland Mayor Libby Schaaf and San Jose Mayor Sam Liccardo. On Friday, Sept. 6, 2019, AB 1482 cleared the Senate Appropriations Committee on a 5-2 vote.

Note that the bill would not apply to properties built in the last 15 years, nor would it apply to single-family home rentals (unless owned by large corporations) or to projects already under construction or under current rent control schemes. The new bill defers to more stringent local measures, including existing local rent control with lower limits and local just cause eviction laws. While the agreement with the governor was lauded by some because it lowered the rental rate increase cap from 7 percent to 5 percent, detractors say that the new bill, if passed, would deter the construction of rental housing and may further exacerbate the affordable housing shortage.

The bill's anti-eviction protections, which would limit evictions to lease violations or require relocation assistance, would kick in after a tenant has lived in an apartment for a year.

Gov. Newsom's striking of a rent cap deal comes less than a year after California voters decisively rejected a ballot measure that would have led to the expansion of local rent control policies statewide, which would have likely resulted in tighter restrictions in some cities than those now offered by AB 1482.